Professional and political recognition is growing that growth ceilings and consolidations of hospital service departments might improve the cost-containment efforts of health plannning facility regulation. However, planning methodologies for evaluating such policies need improvement. The object of the proposed research and development project is to use theory and technic from managerial economics to create appropriateness review methods that will be better able to contain hospital costs. We propose to draw on cost-benefit analysis and decision analysis to derive a new analytic framework from evaluating service closure and growth ceiling policies in Health Systems Areas. We will test and refine this framework by using it in a substantive review of a series of alternative strategies for the closure of cardiac surgery and diagnostic departments in Boston, Massachusetts. Three levels of service department closure and a moratorium on further proliferation will be the alternatives examined. At each level of closure, different criteria for identifying which departments to close will be compared. Based on the results of this application, we will prepare a detailed manual that HSAs and SHPDAs can use to carry out their own economic evluations of cardiac service facility reductions. In addition, we will develop a set of generic methods and recommendations to guide the use of economic analysis in appropriateness reviews of any hospital service.